War in Ukraine Overshadows Energy Transition as Oil CEOs Gather
Bloomberg News
,(Bloomberg) -- Oil executives will be pressed on what they can do about crude’s war-driven rally to almost $120 a barrel when they gather in Houston next week for one of the world’s most-influential energy conferences.
After the pandemic derailed in-person plans for CERAWeek by S&P Global two years in a row, Russia’s invasion of Ukraine will be top of mind for CEOs, oil ministers and academics who thought they’d mostly be discussing the transition away from fossil fuels and emerging alternatives such as hydrogen. As international giants like BP Plc and Exxon Mobil Corp. extricate themselves from Russian investments and wide-reaching sanctions begin to bite, the growing isolation of one of the world’s biggest oil producers has thrown global markets into disarray.
Oil already has climbed to levels not seen in almost a decade and JPMorgan Chase & Co. is warning it may surge even higher — to $185 — because refiners and other buyers are refusing to purchase Russia’s prodigious output. That’s creating an artificial shortage and prompting calls from some quarters for American drillers to step up output and help plug some of the gap. At least one shale powerhouse, Pioneer Natural Resources Co., said it’s open to a “coordinated effort” with peers to ease the supply crunch.
“Oil companies are kind of saying, ‘See, you really do need us,’” said Ed Hirs, an energy professor at the University of Houston. "To be fair, they’ve been put on the defensive since the Nixon era when they were being wrongly blamed for the long gasoline lines.”
CERAWeek’s organizers abruptly amended the agenda in response to Russia’s invasion; four days after President Vladimir Putin ordered troops across the border, a panel titled “Sanctions, Cyber & the Ukraine Crisis” was added, along with two related sessions. That said, the schedule is dominated by sessions on carbon capture, hydrogen extraction, climate change and electric vehicles — a reflection of the fact that organizers began planning the conference in mid 2021, when crude was around $70 and the future of fossil fuels was in question. Now, the conflagration in Europe is aggravating supply-chain disruptions and the most punishing inflation in 40 years.
“There was already a brewing energy crisis in Europe before Ukraine,” CERAWeek founder and S&P Global Vice Chairman Daniel Yergin said during an interview. “Prices over the next several weeks are going to be volatile. This is one of the historic moments for world energy, and it makes it very timely for CERAWeek to be in the middle of history.”
The conference that gets underway Monday will feature more than 300 sessions. When it began in 1981, CERAWeek was almost solely focused on oil and natural gas but has been expanded over the years to include solar, wind, geothermal energy and biofuels.
“This is one of the historic moments for world energy.” — Daniel Yergin
Hydrogen, in particular, is mentioned in the conference program twice as often as oil or gas. Fossil-fuel companies see hydrogen as a way to survive in a low-carbon future, especially if technological advances in extraction of the atom from natural gas can be perfected. Still, Russia’s assault on its smaller neighbor and the knock-on effects for the global economy will dominate the discussion.
“If there is a significant supply disruption with respect to Russian crude ... that will be very difficult for the market to make up and therefore that will lead to, I think, significantly higher prices,” Exxon Chief Executive Officer Darren Woods told CNBC on Thursday. Woods is scheduled to speak at one of the very first sessions on Monday morning, less than a week after announcing plans to abandon all of the company’s Russian business interests.
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